Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information

Schedule of operating income and capital expenditures of geographical segments

The tables below present the Partnership’s segment profit measure, Operating income before items not allocated to segments, and capital expenditures for the three months ended June 30, 2013 and 2012 for the reported segments (in thousands).

Three months ended June 30, 2013:

	Liberty		Utica			Northeast		Southwest		Total
Segment revenue	$	120,057	$	3,594		$	45,365	$	227,842	$	396,858
Purchased product costs	16,993		—			15,126		123,240		155,359
Net operating margin	103,064		3,594			30,239		104,602		241,499
Facility expenses	22,272		6,412			6,655		29,778		65,117
Portion of operating loss attributable to non-controlling interests	—		(1,143		)	—		53		(1,090		)
Operating income (loss) before items not allocated to segments	$	80,792	$	(1,675	)	$	23,584	$	74,771	$	177,472

Three months ended June 30, 2012:

	Liberty		Utica			Northeast		Southwest (1)		Total
Segment revenue	$	59,477	$	—		$	42,051	$	206,551	$	308,079
Purchased product costs	8,018		—			12,921		91,792		112,731
Net operating margin	51,459		—			29,130		114,759		195,348
Facility expenses	13,364		283			4,932		32,156		50,735
Portion of operating (loss) income attributable to non-controlling interests	—		(113		)	—		28		(85		)
Operating income before items not allocated to segments	$	38,095	$	(170	)	$	24,198	$	82,575	$	144,698

(1) Amounts have been restated to reflect the deconsolidation of MarkWest Pioneer as discussed in Note 3 of these Condensed Consolidated Financial Statements.

Six months ended June 30, 2013:

	Liberty		Utica			Northeast		Southwest		Total
Segment revenue	$	228,554	$	4,217		$	102,701	$	436,208	$	771,680
Purchased product costs	35,786		—			34,788		237,342		307,916
Net operating margin	192,768		4,217			67,913		198,866		463,764
Facility expenses	44,908		10,374			13,179		58,468		126,929
Portion of operating (loss) income attributable to non-controlling interests	—		(2,482		)	—		117		(2,365		)
Operating income before items not allocated to segments	$	147,860	$	(3,675	)	$	54,734	$	140,281	$	339,200
Capital expenditures	$	729,040	$	640,819		$	2,509	$	57,816	$	1,430,184
Capital expenditures not allocated to segments										4,900
Total capital expenditures										$	1,435,084

Six months ended June 30, 2012:

	Liberty		Utica			Northeast		Southwest (1)		Total
Segment revenue	$	135,054	$	—		$	128,969	$	441,927	$	705,950
Purchased product costs	32,653		—			38,608		196,025		267,286
Net operating margin	102,401		—			90,361		245,902		438,664
Facility expenses	25,611		283			11,310		64,094		101,298
Portion of operating (loss) income attributable to non-controlling interests	—		(113		)	—		31		(82		)
Operating income (loss) before items not allocated to segments	$	76,790	$	(170	)	$	79,051	$	181,777	$	337,448
Capital expenditures	$	415,506	$	16,786		$	43,475	$	101,481	$	577,248
Capital expenditures not allocated to segments										3,732
Total capital expenditures										$	580,980

(1) Amounts have been restated to reflect the deconsolidation of MarkWest Pioneer as discussed in Note 3 of these Condensed Consolidated Financial Statements.

Reconciliation of segment revenue to total revenue and operating income before items not allocated to segments to income before provision for income tax

The following is a reconciliation of segment revenue to total revenue and operating income before items not allocated to segments to income before provision for income tax for the three months ended June 30, 2013 and 2012 (in thousands):

	Three months ended June 30,
	2013			2012 (3)
Total segment revenue	$	396,858		$	308,079
Derivative gain not allocated to segments	19,699			136,067
Revenue deferral adjustment and other (1)	(1,437		)	(1,324		)
Total revenue	$	415,120		$	442,822
Operating income before items not allocated to segments	$	177,472		$	144,698
Portion of operating income attributable to non-controlling interests	(1,090		)	(85		)
Derivative gain not allocated to segments	39,331			188,792
Revenue deferral adjustment and other (1)	(1,437		)	(1,324		)
Compensation expense included in facility expenses not allocated to segments	(368		)	(183		)
Facility expenses adjustments (2)	2,688			2,688
Selling, general and administrative expenses	(25,499		)	(21,700		)
Depreciation	(71,562		)	(41,336		)
Amortization of intangible assets	(17,092		)	(12,307		)
Gain (loss) on disposal of property, plant and equipment	37,736			(1,342		)
Accretion of asset retirement obligations	(157		)	(160		)
Income from operations	140,022			257,741
Earnings from unconsolidated affiliate	430			1,109
Interest income	62			159
Interest expense	(36,955		)	(26,762		)
Amortization of deferred financing costs and discount (a component of interest expense)	(1,784		)	(1,245		)
Miscellaneous income, net	6			4
Income before provision for income tax	$	101,781		$	231,006

(1) Amount relates primarily to certain contracts in which the cash consideration that the Partnership receives for providing service is greater during the initial years of the contract compared to the later years. In accordance with GAAP, the revenue is recognized evenly over the term of the contract as the Partnership will perform a similar level of service for the entire term. Therefore, the revenue recognized in the current reporting period is less than the cash received. However, the Partnership’s chief operating decision maker and management evaluate the segment performance based on the cash consideration received and therefore, the impact of the revenue deferrals is excluded for segment reporting purposes. For the three months ended June 30, 2013, approximately $0.2 million and $1.4 million of the revenue deferral adjustment is attributable to the Southwest segment and Northeast segment, respectively. In comparison, for the three months ended June 30, 2012, approximately $0.2 million and $1.5 million of the revenue deferral adjustment was attributable to the Southwest segment and Northeast segment, respectively. Beginning in 2015, the cash consideration received from these contracts will decline and the reported segment revenue will be less than the revenue recognized for GAAP purposes.  Other consists of management fee revenues from an unconsolidated affiliate of $0.2 million for the three months ended June 30, 2013 compared to $0.4 million for three months ended June 30, 2012.

(2) Facility expenses adjustments consist of the reallocation of the interest expense related to the SMR, which is included in facility expenses for the purposes of evaluating the performance of the Southwest segment.

(3) Amounts have been restated to reflect the deconsolidation of MarkWest Pioneer as discussed in Note 3 of these Condensed Consolidated Financial Statements.

The following is a reconciliation of segment revenue to total revenue and operating income before items not allocated to segments to income before provision for income tax for the six months ended June 30, 2013 and 2012 (in thousands):

	Six months ended June 30,
	2013			2012 (3)
Total segment revenue	$	771,680		$	705,950
Derivative gain not allocated to segments	19,514			87,352
Revenue deferral adjustment and other (1)	(2,801		)	(3,217		)
Total revenue	$	788,393		$	790,085
Operating income before items not allocated to segments	$	339,200		$	337,448
Portion of operating (loss) income attributable to non-controlling interests	(2,365		)	(82		)
Derivative gain not allocated to segments	50,182			123,023
Revenue deferral adjustment and other(1)	(2,801		)	(3,217		)
Compensation expense included in facility expenses not allocated to segments	(754		)	(633		)
Facility expenses adjustments (2)	5,376			5,376
Selling, general and administrative expenses	(50,741		)	(46,748		)
Depreciation	(139,579		)	(80,918		)
Amortization of intangible assets	(31,922		)	(23,292		)
Gain (loss) on disposal of property, plant and equipment	37,598			(2,328		)
Accretion of asset retirement obligations	(509		)	(396		)
Income from operations	203,685			308,233
Earnings from unconsolidated affiliate	665			1,548
Interest income	211			231
Interest expense	(75,291		)	(56,234		)
Amortization of deferred financing costs and discount (a component of interest expense)	(3,614		)	(2,515		)
Loss on redemption of debt	(38,455		)	—
Miscellaneous income, net	6			62
Income before provision for income tax	$	87,207		$	251,325

(1) Amount relates primarily to certain contracts in which the cash consideration that the Partnership receives for providing service is greater during the initial years of the contract compared to the later years. In accordance with GAAP, the revenue is recognized evenly over the term of the contract as the Partnership will perform a similar level of service for the entire term. Therefore, the revenue recognized in the current reporting period is less than the cash received. However, the Partnership’s chief operating decision maker and management evaluate the segment performance based on the cash consideration received and therefore, the impact of the revenue deferrals is excluded for segment reporting purposes. For the six months ended June 30, 2013, approximately $0.4 million and $3.0 million of the revenue deferral adjustment is attributable to the Southwest segment and Northeast segment, respectively. In comparison, for the six months ended June 30, 2012, approximately $0.4 million and $3.6 million of the revenue deferral adjustment was attributable to the Southwest segment and Northeast segment, respectively. Beginning in 2015, the cash consideration received from these contracts will decline and the reported segment revenue will be less than the revenue recognized for GAAP purposes.  The other consists of management fee revenues from an unconsolidated affiliate of $0.6 million for the six months ended June 30, 2013 compared to $0.8 million for the six months ended June 30, 2012.

(2) Facility expenses adjustments consist of the reallocation of the interest expense related to the SMR, which is included in facility expenses for the purposes of evaluating the performance of the Southwest segment.

(3) Amounts have been restated to reflect the deconsolidation of MarkWest Pioneer as discussed in Note 3 of these Condensed Consolidated Financial Statements.

Schedule of assets by segment

The table below presents information about segment assets as of June 30, 2013 and December 31, 2012 (in thousands):

	June 30, 2013		December 31, 2012 (2)
Liberty	$	3,677,016	$	3,172,144
Utica	1,172,675		439,987
Northeast	572,110		578,122
Southwest	2,365,670		2,086,215
Total segment assets	7,787,471		6,276,468
Assets not allocated to segments:
Certain cash and cash equivalents	215,469		261,473
Fair value of derivatives	37,164		30,382
Investment in unconsolidated affiliate	69,327		63,054
Other (1)	91,452		96,985
Total assets	$	8,200,883	$	6,728,362

(1) Includes corporate fixed assets, deferred financing costs, income tax receivable, receivables and other corporate assets not allocated to segments.

(2) Amounts have been restated to reflect the deconsolidation of MarkWest Pioneer as discussed in Note 3 of these Condensed Consolidated Financial Statements.